A Paperless Office or a World Series Title?

A Paperless Office or a World Series Title?

Barry MacQuarrie, CPA, director of Technology at KAF Financial Group, presents a case study of the firm’s implementation of paperless office technologies.

As a lifelong fan of the Boston Red Sox, I have become very good at saying, “Just wait until next year.” When asked if the paperless office will ever become a reality, the optimist in me keeps saying, “Just wait until next year.”

In Bill Gates’ book, Business @ The Speed Of Thought, he writes, “The first use of the phrase paperless office appeared in a headline a quarter of a century ago in a trade publication for phone companies. The Xerox Corporation (although it never called it a ‘paperless office’) did more to promote the concept than anyone else. In 1974-75, the company was talking about ‘the office of the future’ that would have computers and e-mail with information online.” Will we ever find the “paperless office” that was the vision of these pioneers in the early 1970s? Can a company really do business without paper? For many of us, these questions remain unanswered.

Case Study - KAF Financial Group

In 1999, KAF Financial Group looked like most other CPA firms. Our office was filled with file cabinets. We had hundreds of binders with client related documents. Our computer system had thousands of electronic files in various folders and databases. Often, we maintained an electronic and a paper version of the same document. We spent thousands of hours each year sorting, organizing and filing paper documents. The system was adequate, but not efficient, and we were reminded of the inefficient nature each time we had to search for a paper document that was suddenly “lost.” We were ready for a change.

Our pursuit of the paperless office began in 2000 with implementing a paperless engagement solution and document management system. I am often asked why we implemented two systems that appear so similar. While it’s true that these two types of software have many common features, our firm uses them to meet very different business needs.

Our Paperless Engagement Solution

We selected ProSystem fx® Engagement from CCH (www.tax.cchgroup.com) as our paperless engagement solution. Our goals were to improve the efficiency of our audit process and provide an organized method for storing electronic workpapers. At the time, the process of preparing financial statements and tax returns was labor intensive and involved a significant amount of data entry.

We developed new procedures to exchange data between our audit-related applications and reduce the amount of time spent rekeying data. Our clients are encouraged to submit their data in electronic format allowing us to import it into ProSystem fx Engagement. We also developed standardized procedures for preparing, reviewing and storing electronic workpapers. The result of the project is an audit process that is more efficient, organized and profitable.

Although our paperless engagement solution was a success, we realized that it would not provide for the document storage needs of the other business units at KAF.

Our Document Management System

The process of purchasing a document management system can be very difficult. It seems that every vendor has a different definition of the same term. A document management system should provide the user with the tools to capture, manage, share, secure, index, find and retrieve documents. Our goal was to find a system that would allow us to control all the non-audit related documents that existed within our firm, including tax returns, consulting projects, correspondence, billing records and internal firm documents.

We selected a solution called Xerox—DocuShare‚ (http://docushare.xerox.com/) that provided the software and hardware necessary to create and manage all of our electronic documents. We scanned two years of existing client documents and moved all electronic documents from our network folders to our new document management system. Our team also developed new procedures for converting all documents into an electronic format.

Improved Business Process

Implementing the document management system significantly improved our business processes, allowed us to better serve our clients and increase our ability to recover from a disaster. Everyone uses the same interface - DocuShare - to create, manage, search for and retrieve documents. We no longer have to search through numerous network folders or file cabinets to find client documents. We maintain a digital repository that contains all of the documents. DocuShare includes a powerful indexing system that indexes every word in every document. Their search tool allows us to scan tens of thousands of documents in seconds. Regarding improved service to clients, here are the details of how we conducted business prior to the new system.

Each April, our partners and staff were busy preparing individual tax returns from the paper based documents we received from our clients. Suddenly, the phone would ring and it was a client calling with a question about the tax return we mailed to them two days earlier. For some, “panic” would set in as they realized they needed the client’s tax file and they had no idea where it was located. Our clients would often hear us say, “Let me find your file and call you back.” This resulted in hours of non-billable time spent searching for files - not a model for good client service.

Our procedures have changed. We scan the client’s organizer and source documents when they arrive. We convert them to Adobe PDF files, and add bookmarks and annotations to the PDF files as we prepare and review the tax return. Once complete, the tax return is printed in PDF format and stored with the electronic version of source documents in DocuShare.

Today, when the client calls in early April, we no longer panic. While we share our thoughts about this year’s Red Sox team, we are opening their tax return and source documents from DocuShare. We are ready for their questions and can provide quality client service. Often overlooked, a document management system also can help an organization with their disaster recovery planning process. In the paper world, it is impossible to maintain an off-site copy of every document in the office. A fire or flood would have a dramatic impact on a CPA firm. A digital repository allows us to reduce this risk. Each day, a copy of our entire digital repository is moved to an off-site location as part of our normal backup procedures.

Our Clients Benefit From Document Management Systems

CPA firms are not the only organizations that can benefit from a document management system. As an example, let’s look at how a general contractor struggles with paper in its normal business process. Most general contractors maintain a central office and have teams working at remote job sites. The project managers oversee the work performed at, and materials delivered to, remote job sites. Accordingly, the project managers are often called upon to review and approve vendor invoices. However, most vendors deliver the invoices to the general contractor’s central office. The paper - and the person who needs the paper - are in different locations. The general contractor is forced to ship the paper to the job site or the project manager must travel to the central office.

Using a document management system, a general contractor could solve this problem. The staff at the central office would scan all vendor invoices on arrival. The system allows the project manager access to the digital version of the invoices from the remote job site. The system also can be used to handle the routing and approval process as the invoices move from one person to another, and the general contractor can also build a single digital repository for all job related documents.

It’s All About Process

Moving from a paper-based system to a digital storage repository will not happen overnight. It should be a carefully planned and executed process. A few of the lessons I have learned include the following:

• A member of management must champion the project
• Document your business process
• Select a solution that best fits your process
• Avoid being sold on the “features” of the new system
• Develop standardized policies and procedures
• Select a solution that integrates hardware and software
• Invest in quality products from quality vendors
• There will be resistance
• The results will be worth the aggravation

The impact our document management system has had on our firm is tremendous. We truly could not operate without it. The firm has improved as we have moved from paper-based storage to our digital solution. I believe that most CPA firms can benefit from the move to a digital office. Will we ever see a truly paperless office? Will we ever see a World Series Title in Boston? We should know by next year ….

For further information, contact Barry MacQuarrie: bmacquarrie@kafgroup.com

Reprinted with permission from the American Institute of CPAs